Adjusted net income increased to $35.1 million, or $0.52 per diluted
share, compared to $13.9 million, or $0.21 per diluted share, in the
prior year period, primarily attributable to the benefit of the gross
profit of $30.0 million ($0.29 per diluted share) earned from United
States (U.S.) Zomig® sales pursuant to the previously disclosed
License Agreement with AstraZeneca UK Limited.

GAAP net income decreased to $12.4 million, or $0.18 per diluted
share, compared to $13.9 million, or $0.21 per diluted share,
primarily due to higher expenses and an inventory adjustment as a
result of a change in the strategic direction of certain generic
products.

Total revenues increased to $128.6 million, compared to $108.7 million
in the prior year period, primarily due to higher sales of generic
Adderall XR®. First quarter 2012 revenues exclude U.S. Zomig® sales by
AstraZeneca, although the Company will receive the benefit of the
gross profit from these sales during the specified transition period
pursuant to the License Agreement.

Adjusted earnings before interest, taxes, depreciation and
amortization (Adjusted EBITDA), increased to $61.1 million compared to
$27.1 million in the prior year period, primarily attributable to the
benefit of the gross profit earned from U.S. Zomig® sales by
AstraZeneca.

Please refer to “Non-GAAP Financial Measures” below for a reconciliation
of GAAP to non-GAAP items.

“During the first quarter of 2012, we established the infrastructure to
successfully transition the U.S. commercial opportunity for Zomig® from
AstraZeneca to our brand division. The transaction was accretive to our
first quarter non-GAAP earnings per diluted share as we received the
benefit of the gross profit of $30.0 million from first quarter U.S.
sales, partially offset by our $25.0 million payment under the terms of
the agreement. We also expect this transaction to be accretive to our
non-GAAP earnings for the full year 2012. On April 1, our expanded
neurology focused sales force began promotion efforts. This product will
support the growth of our commercial organization, as we prepare for the
potential launch of IPX066, our leading brand product candidate for
Parkinson’s Disease, and thereafter. The Zomig® license is the latest
effort in our active pursuit of additional long term growth
opportunities for our generic and brand businesses.”

Separately, the U.S. Food and Drug Administration (FDA) completed its
re-inspection of the Company’s Hayward manufacturing facility in
connection with the previously disclosed warning letter. In addition to
the re-inspection relating to the warning letter, the FDA conducted a
general GMP inspection of the Company’s Hayward operations. At the
conclusion of this additional inspection, the FDA issued a new Form 483
with observations primarily relating to the Company’s Quality Control
Laboratory. There were no repeat deficiencies or observations set forth
in the Form 483 and the observations described therein are different
from the observations raised in the warning letter. The Company has
timely submitted its response to the Form 483 to the FDA.

Currently, the Company has not been informed by the FDA of the impact
this latest Form 483 will have on the resolution or timing of resolving
the warning letter or whether any further regulatory action may be taken
as to its manufacturing operations. The Company has no control over the
Agency’s timing to review its response or to evaluate its corrective
actions. In the interim, the Company continues to manufacture products
and is working diligently to address the observations raised by the FDA
in the Form 483.

Dr. Hsu said “While we believe we have addressed the observations raised
in the warning letter and have instituted appropriate corrective
actions, we are disappointed to have received a Form 483 on these new
observations. We believe we have submitted a complete response to the
Form 483 and are working diligently to enhance our quality control
procedures. We have already taken decisive action, including a change in
the testing laboratory leadership, as well as strengthened and clarified
laboratory testing standard operating procedures.”

Segment Information

The Company has two reportable segments, the Global Pharmaceuticals
Division (generic products & services) and the Impax Pharmaceuticals
Division (brand products & services) and does not allocate general
corporate services to either segment.

Global Pharmaceuticals Division Information

(unaudited, amounts in thousands)

Three Months EndedMarch 31,

2012

2011

Revenues:

Global Product sales, net

$

116,211

$

92,338

Rx Partner

2,978

2,682

OTC Partner

691

1,943

Research Partner

3,385

6,385

Total Revenues

123,265

103,348

Cost of revenues

63,106

47,174

Gross profit

60,159

56,174

Operating expenses:

Research and development

10,662

9,776

Patent litigation

4,038

1,774

Selling, general and administrative

4,766

2,931

Total operating expenses

19,466

14,481

Income from operations

$

40,693

$

41,693

Global Pharmaceuticals Division revenues increased $19.9 million to
$123.3 million in the first quarter 2012, compared to $103.3 million in
the prior year, due to higher Global Product sales, net.

For the first quarter 2012, Global Product sales, net, were $116.2
million, up $23.9 million from the prior year primarily due to higher
sales of authorized generic Adderall XR® products ($53.6 million in the
first quarter 2012 compared to $36.1 million in the prior year), as well
as higher sales of other Global label products. Partially offsetting
this increase were declines in Research Partner and OTC Partner
revenues. Research Partner revenues declined $3.0 million due to a
milestone payment achieved during the first quarter of 2011 under the
Medicis joint development agreement originally entered into in the
fourth quarter of 2008. OTC Partner revenues declined due to lower sales
of product marketed under the Company’s alliance agreement with Pfizer.

Gross profit of $60.2 million represented a 49% gross margin in the
first quarter 2012, and was lower than the gross margin of 54% for the
prior year period. The decline was primarily due to a $5.2 million
inventory adjustment as a result of a change in the strategic direction
of certain generic products. Additionally, gross profit in the first
quarter 2011 includes the $3.0 million payment from Medicis described
above.

Total generic operating expenses in the first quarter 2012 increased
$5.0 million to $19.5 million, compared to the prior year, due to higher
planned investments in research and development (R&D), as well as patent
litigation and selling, general and administrative expenses (SG&A).

Impax Pharmaceuticals Division Information

(unaudited, amounts in thousands)

Three Months EndedMarch 31,

2012

2011

Revenues:

Rx Partner

$

1,438

$

1,438

Promotional Partner

3,535

3,535

Research Partner

330

330

Total revenues

5,303

5,303

Cost of revenues

2,909

2,940

Gross profit

2,394

2,363

Operating expenses:

Research and development

8,154

9,714

Selling, general and administrative

3,061

1,107

Total operating expenses

11,215

10,821

Loss from operations

$

(8,821

)

$

(8,458

)

Impax Pharmaceuticals Division revenues in the first quarter 2012 were
flat compared to the prior year.

Total brand operating expenses in the first quarter 2012 increased
slightly compared to the prior year due to higher SG&A expenses,
partially offset by lower R&D expenses.

On February 1, 2012, the Company announced that it had entered into the
Distribution, License, Development and Supply Agreement with AstraZeneca
UK Limited. As part of the License Agreement, AstraZeneca granted to the
Company an exclusive license to commercialize the tablet, orally
disintegrating and nasal spray formulations of Zomig® (zolmitriptan)
products for the treatment of migraine headaches in the United States
and in certain U.S. territories. Under the terms of the agreement, the
Company agreed to pay AstraZeneca quarterly payments totaling $130.0
million during 2012 of which $25.0 million was paid in the first
quarter. During the specified product transition period pursuant to the
agreement, the Company will receive the benefit of the gross profit
($30.0 million for the three months ended March 31, 2012) from U.S.
Zomig® sales commencing from January 1, 2012 and ending when the Company
commences commercialization of the Zomig® products. The benefit of the
gross profit received from AstraZeneca is recorded as a reduction of the
$130.0 million to be paid by the Company to AstraZeneca during 2012 and
is not reflected within the Company’s income.

Corporate and Other

(unaudited, amounts in thousands)

Three Months EndedMarch 31,

2012

2011

General and administrative expenses

$

13,406

$

12,541

Loss from operations

$

(13,406

)

$

(12,541

)

General and administrative expenses in the first quarter 2012 increased
$0.9 million compared to the prior year primarily due to higher
corporate legal fees.

Cash and Short-term Investments

Cash and short-term investments were $343.3 million as of March 31,
2012, as compared to $346.4 million as of December 31, 2011.

2012 Financial Outlook

The Company’s 2012 financial outlook which was last updated on February
1, 2012 is noted below.

Gross margins as a percent of total revenues of approximately 60%.

Total R&D expenses across the generic and brand divisions to
approximate $89.0 million with generic R&D of approximately $48.0
million and brand R&D of approximately $41.0 million.

Patent litigation expenses of approximately $10.0 million.

SG&A expenses of approximately $113.0 million.

Effective tax rate of approximately 36%.

Capital expenditures of approximately $78.0 million.

Conference Call Information

The Company will host a conference call on May 1, 2012 at 11:00 a.m. EDT
to discuss its results. The number to call from within the United States
is (877) 356-3814 and (706) 758-0033 internationally. The call can also
be accessed via a live Webcast through the Investor Relations section of
the Company’s Web site, www.impaxlabs.com.
A replay of the conference call will be available shortly after the call
for a period of seven days. To access the replay, dial (855) 859-2056
(in the U.S.) and (404) 537-3406 (international callers). The access
conference code is 69137467.

About Impax Laboratories, Inc.

Impax Laboratories, Inc. is a technology based specialty pharmaceutical
company applying its formulation expertise and drug delivery technology
to the development of controlled-release and specialty generics in
addition to the development of branded products. Impax markets its
generic products through its Global Pharmaceuticals Division and markets
third-party branded products through the Impax Pharmaceuticals Division.
Additionally, where strategically appropriate, Impax has developed
marketing partnerships to fully leverage its technology platform. Impax
Laboratories is headquartered in Hayward, California, and has a full
range of capabilities in its Hayward, Philadelphia and Taiwan
facilities. For more information, please visit the Company's Web site
at: www.impaxlabs.com.

To the extent any statements made in this news release contain
information that is not historical, these statements are forward-looking
in nature and express the beliefs and expectations of management. Such
statements are based on current expectations and involve a number of
known and unknown risks and uncertainties that could cause the Company’s
future results, performance or achievements to differ significantly from
the results, performance or achievements expressed or implied by such
forward-looking statements. Such risks and uncertainties include, but
are not limited to, the effect of current economic conditions on the
Company’s industry, business, financial position and results of
operations, fluctuations in the Company’s revenues and operating income,
the Company’s ability to successfully develop and commercialize
pharmaceutical products, reductions or loss of business with any
significant customer, the impact of consolidation of the Company’s
customer base, the impact of competition, the Company’s ability to
sustain profitability and positive cash flows, any delays or
unanticipated expenses in connection with the operation of the Company’s
Taiwan facility, the effect of foreign economic, political, legal and
other risks on the Company’s operations abroad, the uncertainty of
patent litigation, increased government scrutiny on the Company’s
agreements with brand pharmaceutical companies, consumer acceptance and
demand for new pharmaceutical products, the difficulty of predicting
Food and Drug Administration filings and approvals, the Company’s
inexperience in conducting clinical trials and submitting new drug
applications, the Company’s ability to successfully conduct clinical
trials, the Company’s reliance on third parties to conduct clinical
trials and testing, the availability of raw materials and impact of
interruptions in the Company’s supply chain, the use of controlled
substances in the Company’s products, disruptions or failures in the
Company’s information technology systems and network infrastructure, the
Company’s reliance on alliance and collaboration agreements, the
Company’s dependence on certain employees, the Company’s ability to
comply with legal and regulatory requirements governing the healthcare
industry, the regulatory environment, the Company’s ability to protect
the Company’s intellectual property, exposure to product liability
claims, changes in tax regulations, the Company’s ability to manage the
Company’s growth, including through potential acquisitions, the
restrictions imposed by the Company’s credit facility, uncertainties
involved in the preparation of the Company’s financial statements, the
Company’s ability to maintain an effective system of internal control
over financial reporting, any manufacturing difficulties or delays, the
effect of terrorist attacks on the Company’s business, the location of
the Company’s manufacturing and research and development facilities near
earthquake fault lines and other risks described in the Company’s
periodic reports filed with the Securities and Exchange
Commission. Forward-looking statements speak only as to the date on
which they are made, and Impax undertakes no obligation to update
publicly or revise any forward-looking statement, regardless of whether
new information becomes available, future developments occur or
otherwise.

Impax Laboratories, Inc.

Consolidated Statements of Operations

(unaudited, amounts in thousands, except share and per share
data)

Three Months EndedMarch 31,

2012

2011

Revenues:

Global Pharmaceuticals Division

$

123,265

$

103,348

Impax Pharmaceuticals Division

5,303

5,303

Total Revenues

128,568

108,651

Cost of revenues

66,015

50,114

Gross profit

62,553

58,537

Operating expenses:

Research and development

18,816

19,490

Patent litigation

4,038

1,774

Selling, general and administrative

21,233

16,579

Total operating expenses

44,087

37,843

Income from operations

18,466

20,694

Other income (expense), net

(80

)

3

Interest income

255

321

Interest expense

(39

)

(16

)

Income before income taxes

18,602

21,002

Provision for income taxes

6,269

7,144

Net income before noncontrolling interest

12,333

13,858

Add back loss attributable to noncontrolling interest

32

5

Net Income

$

12,365

$

13,863

Net Income per share:

Basic

$

0.19

$

0.22

Diluted

$

0.18

$

0.21

Weighted average common shares outstanding:

Basic

65,122,240

63,390,527

Diluted

67,907,263

67,044,266

Impax Laboratories, Inc.

Condensed Consolidated Balance Sheets

(unaudited, amounts in thousands)

March 31,

December 31,

2012

2011

Assets

Current assets:

Cash and cash equivalents

$

192,048

$

104,419

Short-term investments

151,202

241,995

Accounts receivable, net

119,183

153,773

Inventory, net

57,938

54,177

Deferred product manufacturing costs

1,444

1,413

Deferred income taxes

38,586

37,853

Prepaid expenses and other current assets

89,295

6,305

Total current assets

649,696

599,935

Property, plant and equipment, net

126,886

118,158

Deferred product manufacturing costs

7,236

7,433

Other assets

44,909

38,509

Intangible assets, net

46,997

2,250

Goodwill

27,574

27,574

Total assets

$

903,298

$

793,859

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

18,568

$

22,955

Accrued expenses

73,950

70,116

Accrued profit sharing and royalty expenses

25,567

40,766

Accrued product licensing payments

105,000

-

Deferred revenue

17,926

23,024

Total current liabilities

241,011

156,861

Deferred revenue

16,189

17,131

Other liabilities

19,768

16,861

Total liabilities

276,968

190,853

Total stockholders' equity

626,330

603,006

Total liabilities and stockholders' equity

$

903,298

$

793,859

Impax Laboratories, Inc.

Consolidated Statements of Cash Flows

(unaudited, amounts in thousands)

Three Months Ended

March 31,

2012

2011

Cash flows from operating activities:

Net income

$

12,365

$

13,863

Adjustments to reconcile net income to net cash provided by
operating activities:

Depreciation and amortization

3,722

3,457

Amortization of Credit Agreement deferred financing costs

8

5

Accretion of interest income on short-term investments

(171

)

(245

)

Deferred income taxes

801

(1,106

)

Provision for uncertain tax positions

16

40

Tax benefit related to the exercise of employee stock options

(1,632

)

(2,353

)

Deferred revenue

315

910

Deferred product manufacturing costs

(495

)

(478

)

Recognition of deferred revenue

(6,061

)

(7,384

)

Amortization of deferred product manufacturing costs

661

1,357

Accrued profit sharing and royalty expense

25,555

17,090

Payments of profit sharing and royalty expense

(40,755

)

(14,139

)

Share-based compensation expense

3,809

2,887

Bad debt expense

-

62

Changes in assets and liabilities:

Accounts receivable

34,590

(12,288

)

Inventory

(3,761

)

(4,291

)

Prepaid expenses and other assets

(3,745

)

(949

)

Accounts payable and accrued expenses

(4,153

)

2,518

Other liabilities

2,661

2,055

Net cash provided by operating activities

23,730

1,011

Cash flows from investing activities:

Purchase of short-term investments

(35,585

)

(87,783

)

Maturities of short-term investments

126,549

135,408

Purchases of property, plant and equipment

(8,165

)

(8,723

)

Payment for product licensing rights

(25,000

)

-

Net cash provided by investing activities

57,799

38,902

Cash flows from financing activities:

Tax benefit related to the exercise of employee stock options and
restricted stock

1,632

2,353

Proceeds from exercise of stock options and ESPP

4,468

6,669

Net cash provided by financing activities

6,100

9,022

Net increase in cash and cash equivalents

87,629

48,935

Cash and cash equivalents, beginning of period

104,419

91,796

Cash and cash equivalents, end of period

$

192,048

$

140,731

Impax Laboratories, Inc.

Non-GAAP Financial Measures

Total adjusted net income, adjusted net income per diluted share
and adjusted EBITDA are not measures of financial performance
under generally accepted accounting principles (GAAP) and should
not be construed as substitutes for, or superior to, GAAP net
income, and net income per diluted share as a measure of financial
performance. However, management uses both GAAP financial measures
and the disclosed non-GAAP financial measures internally to
evaluate and manage the Company’s operations and to better
understand its business. Further, management believes the
inclusion of non-GAAP financial measures provides meaningful
supplementary information to and facilitates analysis by investors
in evaluating the Company’s financial performance, results of
operations and trends. The Company’s calculation of adjusted net
income, adjusted net income per diluted share and adjusted EBITDA,
may not be comparable to similarly designated measures reported by
other companies, since companies and investors may differ as to
what type of events warrant adjustment.

The following table reconciles reported net income to adjusted net
income.

(Unaudited, amounts in millions, except per share data)

Three months ended March 31,

2012

2011

Net income

$

12.4

$

13.9

Adjusted to add (deduct):

Gross profit earned on Zomig® Agreement(a)

30.0

-

Strategic inventory adjustment

5.2

-

Income tax effect

(12.5

)

-

Adjusted net income

$

35.1

$

13.9

Adjusted net income per diluted share

$

0.52

$

0.21

Net income per diluted share

$

0.18

$

0.21

Impax Laboratories, Inc.

Non-GAAP Financial Measures

The following table reconciles reported net income to adjusted
EBITDA.

(Unaudited, amounts in millions)

Three months ended March 31,

2012

2011

Net income

$

12.4

$

13.9

Adjusted to add (deduct):

Interest income

(0.3

)

(0.3

)

Depreciation, amortization and other

3.7

3.5

Income taxes

6.3

7.1

EBITDA

22.1

24.2

Adjusted to add:

Gross profit earned on Zomig® Agreement(a)

30.0

-

Strategic inventory adjustment

5.2

-

Share-based compensation

3.8

2.9

Adjusted EBITDA

$

61.1

$

27.1

(a)

During the specified product transition period pursuant to
the agreement, the Company will receive the benefit of the gross
profit ($30.0 million for the three months ended March 31, 2012)
from U.S. Zomig® sales commencing from January 1, 2012 and ending
when the Company commences commercialization of the Zomig®
products. The benefit of the gross profit received from
AstraZeneca is recorded as a reduction of the $130.0 million to be
paid by the Company to AstraZeneca during 2012 and is not
reflected within the Company’s income but included in the
Company’s adjusted net income. This reduction in the $130 million
to be paid to AstraZeneca will result in lower future amortization
expense in the GAAP results and will be excluded from future
adjusted results.